Free Credit Note Generator
Create a credit note online to cancel or reduce an invoice — free, no signup
What is a credit note?
A credit note is a document issued by a seller that reduces or cancels an amount previously invoiced. It is the correct way to fix an overcharge, process a return, or void an invoice — because an issued invoice should never be deleted or edited once it has been sent.
The rule that makes credit notes necessary is simple: once an invoice has been sent, it is part of your numbered sales record and should not be altered or deleted. When something was wrong with it, you leave the invoice in place and issue a credit note that reverses the relevant amount, so the audit trail shows both what was charged and what was corrected.
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How to create a credit note in 4 steps
- Enter your business and customer details. Use the same customer details as the original invoice. The document title is already set to a credit note.
- Reference the original invoice. Put the original invoice number and date in the notes field, along with the reason for the credit.
- Add the lines you are crediting. Enter the lines being reversed with their original quantities and rates, and apply tax at the rate used on the original invoice.
- Download the PDF and send it. Download a print-ready PDF and send it to the customer, stating whether the credit is being refunded or held against future invoices.
What to include on a credit note
- The words 'Credit Note' and a unique credit note number
- A credit note needs its own sequence so it is distinguishable from invoices in your records, and so it cannot be mistaken for a demand for payment.
- The original invoice number and date
- This is the single most important field. Without it, neither your accounts nor your customer's can match the credit to what it reverses.
- The reason for the credit
- Returned goods, a pricing error, a service not delivered, a goodwill adjustment. Auditors and customers both ask, and writing it once on the document prevents the question.
- The lines being credited
- Credit the specific lines rather than a lump sum where you can, so the correction can be traced to the original charge item by item.
- Tax on the credited amount
- Reverse tax at the same rate applied on the original invoice. A credit note that omits the tax leaves your tax account overstated.
- What happens next
- State whether the credit is a refund being paid out or a balance held against future invoices — the two have very different consequences for the customer.
Credit note vs invoice vs refund
An invoice increases what a customer owes. A credit note decreases it, and is a document rather than a movement of money. A refund is the actual payment back to the customer. A credit note frequently accompanies a refund, but it can also simply reduce an outstanding balance or sit as a credit against future invoices — in which case no money moves at all. Because the credit note is the accounting record, it should be issued whichever way the value is settled.
When to issue a credit note instead of editing an invoice
Any time the invoice has already been sent. Editing a sent invoice breaks the numbered sequence that makes a sales ledger auditable, and if the customer has already filed their copy you now have two different documents with the same number in circulation. Issue the credit note against the original, then — if a corrected charge is due — raise a fresh invoice with a new number. The trail reads: charged, corrected, recharged, which is exactly what an auditor or a suspicious customer wants to see.
Full and partial credits
A full credit cancels the invoice entirely — used when work was not delivered, or the invoice was issued to the wrong customer. A partial credit reduces it, for a returned item, an overcharge on one line, or an agreed discount applied after the fact. For a partial credit, list only the affected lines at the amount being reversed rather than restating the whole invoice, so the arithmetic is obvious.
Credit notes and your tax return
Because a credit note changes the value of a taxable supply, it usually changes the tax you owe for the period in which it is issued. Most VAT and GST regimes have specific requirements for what a credit note must show and which period it belongs to, and some set a time limit for issuing one. If you are registered for VAT, GST or sales tax, check the rules that apply where you are registered rather than assuming a credit note can be backdated to the original invoice's period.
Frequently asked questions
What is a credit note?
A credit note is a document issued by a seller that reduces or cancels an amount previously charged on an invoice. It is used to correct an overcharge, process a return, or void an invoice that should not have been issued, while leaving the original invoice intact in the records.
When should I issue a credit note instead of deleting an invoice?
Whenever the invoice has already been sent to the customer. A sent invoice is part of your numbered sales record and should not be edited or deleted; issuing a credit note against it preserves the audit trail and keeps your numbering intact.
Does a credit note mean a refund?
Not necessarily. A credit note is a document that reduces what the customer owes. It may be settled by refunding money, by reducing an outstanding invoice, or by holding a credit against future invoices. State on the credit note which of these applies.
Do I charge tax on a credit note?
You reverse it. Apply the same tax rate that was charged on the original invoice to the amount being credited, so your tax account reflects the corrected value of the supply. Most VAT and GST regimes have specific rules about what a credit note must show and which period it falls in — check the rules where you are registered.
Is this credit note generator free?
Yes. You can create and download unlimited PDF credit notes without paying or creating an account.
Need an invoice instead?
The same tool creates invoices, and every field label can be renamed. Fill it in and download a PDF — free, no account required.
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